Higher Education Costs: What Could The Federal Government Do?

President Obama’s State of the Union glossed on a topic that’s quite relevant to the recent debates about legal education:

“Of course, it’s not enough for us to increase student aid. We can’t just keep subsidizing skyrocketing tuition; we’ll run out of money. States also need to do their part, by making higher education a higher priority in their budgets. And colleges and universities have to do their part by working to keep costs down. Recently, I spoke with a group of college presidents who’ve done just that. Some schools re-design courses to help students finish more quickly. Some use better technology. The point is, it’s possible. So let me put colleges and universities on notice: If you can’t stop tuition from going up, the funding you get from taxpayers will go down. Higher education can’t be a luxury— it’s an economic imperative that every family in America should be able to afford.”

As political pap goes, this is as good as any. But I’d go a step further to ask how the government could help keep down costs, apart from threatening to take away subsidies. Costs have many drivers, including rising student demand for particular kinds of campus amenities, legacy benefit costs that plague all large-scale employers, and rising health costs. But the biggest factor is faculty salaries. Given tenure (which affects law schools disproportionately because of our accreditor’s monopoly) it might seem like this is a wicked problem. Maybe it is, but the President could have called for the Congress to make a small change in law that might make a real difference: repeal that portion of the ADEA which prohibits mandatory retirement ages for university professors.

As is well-known, the federal government prohibits mandatory retirement policies except when age is a bona fide occapational requirement or when the person is a qualifying executive. 29 U.S.C. §§623(f), 631(c). An exception for tenured employees, including professors, was phased out in 1993. (The law phasing out the exception passed in 1986). As this study predicted, the impact on research universities in particular is severe, as an increasingly high percentage of workers stay on the job after age 70. Why does this matter? If teaching and/or scholarship decreases after many years on the job – and there is some evidence that they do – universities have few remedies given tenurial job protections for under performing employees. In today’s economy, with an increasingly volatile stock market, and unpalatable health insurance choices, we’d probably also expect that fewer faculty will retire voluntarily in the future than they used to. Thus, many institutions will find it hard to reduce costs by reducing faculty sizes (or paying less per person by replacing older, more expensive, employees with younger, cheaper, ones.) We will deliver fewer educational goods, at higher costs.

Now there are good reasons for prohibiting mandatory retirement in general. But I’ve never understood why those reasons translate when you’ve got a tenured faculty who often exercise more self-government than law firm partners. In any event, given the economic realities of the moment, lumping faculty in with other workers feels like a luxury students can no longer afford.